Refinance Mortgage, Loans & Mortgages, Mortgage Basics, Home Equity Loan, second mortgage, mortgage finance   Refinance Mortgage, Loans & Mortgages, Mortgage Basics, Home Equity Loan, second mortgage, mortgage finance 
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Refinancing: Is now a good time?

Home > Loans & Mortgages > Refinancing: Is now a good time?

Things you should consider
Refinance Mortgage, Loans & Mortgages, Mortgage Basics, Home Equity Loan, second mortgage, mortgage finance
With refinancing opportunities so much in the news, it is important for you to know that there could be some companies that might try to take advantage of you. From giving you false rates over the telephone to adding ridiculous hidden costs in your loan, some financial companies will do anything to take money off you. Here are some tips to make sure that you get the most out of your refinance exercise:

Ensure that the company is reputable
Many new players will try and get a slice of the refinance pie. Lack of experience, no reputation, and no company history are just a few of the factors that can lead to a bad deal. How should you go about this? Ask lots of questions and make sure you feel comfortable with the level of service offered. Make sure you understand every bit of your refinance process.

Know What to Ask
It takes more than just calling a lender and asking "What is your rate?" A lender might tell you the rates are at an all time low of 5%. But what they might not tell you is that there are three origination points involved, there are 20% refinance penalties involved, etc. It is your responsibility to ask and find the conditions of the rate, talk about the kind of loan you need, i.e. cash-out, low-cost refinance, lock period, etc. Did you know that a loan with a lock-in period of 15 days is much lower than 60 days? But how many of us are ready to go to closing in two weeks? So be careful, and very specific. Here are some other common questions you could ask:

Q. Should I lock-in my loan rate when I apply for the mortgage loan?

A. No one knows for sure how interest rates will move in the future, but your lender may be able to give you an estimate of where he or she thinks mortgage rates are headed. If interest rates are expected to be volatile in the near future, you may want to lock your interest rate if rising rates will no longer allow you to qualify for the loan. If your budget can handle a higher loan payment or if the lenderís lock fee seems excessive for your means, you might consider allowing the interest rate to 'float' until the loan closing.

Q. Should I choose the lender with the lowest costs and interest rate?

A. There are primarily two things to consider when choosing a lender over another: the quality and the cost of services provided. Quality of service is really important to those who have never purchased a home. First-time home buyers will likely have many questions regarding the financing process and available options. When comparing lenders, ask each lender as many questions as you can and then fill out any loan application. A good lender will be able to get you through the financing process leaving you confident that you made a sound financial decision. If after a few questions you do not feel comfortable with the lender, simply call the next one on your list.

Should I Refinance?
Here's what you've need to consider:

Costs: Add up ALL the costs, which might include points, and fees for the application, loan origination, appraisal, attorney, credit report, extra insurance, inspections, private mortgage insurance, recording, survey, title insurance, underwriting, etc.

Monthly Savings: Calculate your monthly savings by subtracting your current monthly payment from your refinanced mortgage's monthly payment.

Tax Cost: Multiply your monthly savings by your combined federal and state tax rate. Net Savings: Subtract your tax cost (the cheaper loan always gives you a smaller tax benefit) from your monthly savings.

Break-Even Point: Divide your total costs by your net savings to calculate how many months it will take to pay off the cost of refinancing.

For example, if you will save $100 a month on the refinanced mortgage and the refinanced mortgage costs you $2,500 it would take you just over two years, 25 months, to break even and start enjoying the savings.

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